r/tqqq
Systematic Macro Trend Strategy for Investing in Growth Assets
Author shares a TradingView strategy using QQQ and high-yield bond credit risk to avoid deep bear markets in growth assets.
This is a Tradingview strategy that uses QQQ price action alongside high-yield bonds credit risk to help determine macro trends for growth assets. The biggest problem for holding growth assets for long term is that during deep crashes or long bearmarkets, these portfolios can get destroyed. This system is meant to handle smaller market pullbacks while it is designed to exit before deep corrections or long bear markets.
QQQ backtest:
Statistically this strategy has low amount of trades on the backtest (12 in 23 years), but that is what I am looking for since this is more of an investing strategy than "trading" strategy.
Blue arrow = long
Purple arrow = close
High-yield bonds are very sensitive to risk in the market. They are bonds issued by companies that have higher default risk so investors are quick to react if they see market stresses. Since growth assets tend to have higher beta compared to others, they are the most sensitive to bond credit risk. Retail is not the one buying these bonds, it's institutions. There is almost 30 years of data available. This is why I'm tracking high-yield bonds credit risk for my strategy.
When it comes to QQQ, it is an ETF from 1999 that tracks Nasdaq 100 index (top 100 largest non-financial US companies on Nasdaq). It is heavily dominated by growth companies. As it updates its holding regularly, it is reliable at tracking the momentum of growth assets in the future as well. This is why I track QQQ price action for my strategy.
How it works:
The strategy looks at high-yield bonds credit risk data to look for conditions where risk is easing/increasing. This data is published with 1 day delay, which is taken into account on the backtest for real-world accuracy. At the same time the strategy analyses QQQ price action to determine if technicals look ideal for long/close signal. I can tell you that the strategy includes a soft "stop loss" signal if QQQ were to drop -20% to protect capital just in case close signal didn't trigger before that.
Besides the main long and close signals, there are additional indicators (green triangles) as optional scale-in signals, which trigger on market dips as long as market risk is still contained. I've also scripted blue paint on days when long signal is near and red paint for days when close signal is near.
How it could be used:
Since the system is meant to track the macro trends of the market, it can work with a basket of quality growth stocks. Leveraged ETFs can also be considered, but you must be wary of high volatility and volatility decay. Also avoid over-allocation into leveraged products, because the drawdowns can be big even with a system. If the strategy is currently "long", you should avoid chasing it until the strategy gives the proper conditions for enter.
Tradingview doesn't allow any technical alerts for free users so another way for investor style plan is to set weekly alarms on phone as a reminder to check the chart. If QQQ is above 200 SMA, it's likely that long signal is near. If QQQ is below 100 SMA, checking for close signal should be more frequent.
Feedback:
I'm looking for feedback so I'm currently giving free access to everyone interested to see how the strategy works on different assets, let me know if you want to check it out.
Disclaimer:
This strategy is a software tool provided for educational and informational purposes only. This is not financial advice, and past performance does not guarantee future results. Always manage your own risk and position sizing.
VIX as a tracker seems more reliable, e.g. buying when VIX > 20, selling when < 16.
On your screen for 2022, you would have to keep holding through all drawdowns, meanwhile, using VIX you could avoid some.
Do you mean VIX combined with this strategy or just as it is?
VIX alone
If you buy when VIX is above 20 and sell below 16, you'd hold through the whole drop, same with most of bear markets. If you mean buying below 16 and selling above 20, then it gives a backtest (1999-2026) with 54% winrate with 50 trades and total +129% PnL.
I'd really advise you share your rules instead of teasing like this...
I'm planning to release this as an invite-only strategy on Tradingview so I can't give exact rules. But I'll copy my comment from another post:
"The strategy tracks ICE BofA US High Yield Index Option-Adjusted Spread. When market stress increases, the yield widens (goes up) and vice versa. The strategy looks at different technical conditions to determine if the spread movement has been significant enough."
Fair enough, but honestly the HY OAS angle is the interesting part, not the secret sauce. Widening spreads as a risk-off trigger for QQQ/TQQQ is a solid macro filter, plenty of folks here already lean on HYG or credit as a regime signal. The catch is 12 trades in 23 years means basically everything rides on nailing the exits around 2000/2008/2022. Can you share a testfolio or even just the OAS threshold you flip out on? Tough to judge the edge when the only number on screen is the backtest stat...
That's right, what I want with this strategy is to stay in the market as much as possible while avoiding the crashes and bear markets, which eventually always comes to destroy portfolios. Since that is where the value is I can't reveal these parameters. Keep in mind that there is also the QQQ technical aspect of the strategy.
If you are going to post AI slop make it shorter. If you can’t be bothered to write it no one can be bothered to read it.